Law:

Section:

Section 35E, read with section 37(1) [Corresponding to section 10(2)(xv) of the Indian Income-tax Act, 1922] of the Income-tax Act, 1961 - Expenditure on prospecting etc for certain minerals - Assessee - HUF had taken two tin mines on lease - It subleased his leasehold right in mines to third parties who had worked portions of leasehold lands - Proportionate cost of acquisition of leasehold rights in land wherein mines had become exhausted was claimed as deduction - Whether when assessee had not himself worked mines but it had lease out right to work mines to third parties, there was no question of assessee incurring any expenditure for working of mines and, therefore, no question of deduction arose - Held, yes FACTS The assessee owned rubber gardens and house properties in Malaya and had also been dealing in the purchase and sale of immovable properties. In the year ended 12-2-1961, it acquired the leasehold rights in respect of tin mines. Thereafter, it sub-leased his leasehold right in the mines to third parties who had worked portions of the leasehold lands. The proportionate cost of the acquisition of the leasehold rights in the land wherein mines had become exhausted was claimed as a deduction. The ITO disallowed the claim. The AAC and the Tribunal upheld the disallowance. On reference : HELD Admittedly, the assessee had not worked the mines and it had leased out the right to work the mines to third parties. There was, therefore, no question of the assessee incurring any expenditure for the working of the mines during the assessment year and all expenses of working the mines would have been incurred by the sub-lessee who actually worked the mines. The sum represented a part of the amount spent on outlay in the course of the acquisition of the leasehold right in the mines and, therefore, there was no question of writing off the said sum as an expenditure incurred in the course of the assessment year. The amount claimed had not been expended in the year of account. Therefore, it could not be said to be an expenditure, whether it was capital or revenue, which could be considered for deduction under section 10(2)(xv) of the 1922 Act. If at all, the amount…

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